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On March 27th, the President signed the CARES Act, the third coronavirus relief packaged signed by the President.  AT 880 pages and $2 Trillion in economic impact, the CARES Act is very large and contains many important provisions for businesses.  Here we will highlight several of the Act’s key provisions.




Title I of the CARES Act is the Keeping American Workers Paid and Employed Act, which establishes the Paycheck Protection Program (“PPP”). Congress has appropriated $349 billion for the PPP, for three months of 100% guaranteed 7(a) loans to cover payroll costs, employer group health, interest on mortgage payments, rent obligations, and utilities, and interest on other debt incurred before February 15, 2020. The CARES Act establishes a loan forgiveness program for PPP loans and the loan period ends June 30, 2020.

 The CARES Act establishes the PPP’s eligibility to include (a) businesses, 501(c)(3) non-for profits, 501(c)(19) veterans’ organizations or tribal business concerns with fewer than 500 employees or those that meet SBA’s current size standards for 7(a) loans.  Both full and part-time employees are counted.  Additionally, the SBA’s requirement that the company not have alternate sources of credit is suspended. 

 The maximum loan amount is the lesser of $10,000,000; or the average monthly payroll amount for the trailing 12 months times 2.5, plus the amount of any pre-existing emergency loan to be refinanced.  Payroll costs are salary, wages, commissions, and similar compensation; payment of cash tips or their equivalent; payment for vacation, parental, family, medical, and sick leave; allowance for dismissal or separation; payment required for group healthcare, including benefits; payment of retirement benefits; payment of tax on compensation; and payments of compensation to or income of a sole proprietor or independent contractor.  Payroll cost do not include the compensation of or payments to any individual in excess of $100,000 as prorated for the covered period; certain taxes; compensation or employees outside of the United States; or qualified sick leave or family leave wages for which a credit is allowed under the Families First Coronavirus Response Act (“FFCRA”).

 The interest rate is set at 4 percent. Collateral and guarantee requirements are waived. Repayment is deferred for at least 6 months, and up to 1 year, based on guidance to be issued by the SBA within 30 days after the date of enactment of the CARES Act. The maximum loan repayment period is ten (10) years.  There is no loan fee or prepayment fee and the usual SBA 7(a) loan collateral and guarantee requirements are waived. 

 All current SBA 7(a) lenders are eligible to issue Program loans, so try giving your banker a call and ask for an application.  Underwriting is based on COVID-19 impact, not ability to repay.

Finally, about potential forgiveness.  Borrowers are eligible to have loan amounts forgiven to the extent that they are used to pay for payroll expenses, interest on covered mortgage obligations, covered rent obligations, and utilities, during the period ending June 30, 2020. The amount of loan forgiveness may not exceed the principal amount of the loan (you’ll still owe the accrued interest even if the loan is completely forgiven),  and the loan forgiveness is subject to reduction if there is a reduction in the business’s number of employees or a reduction in wages through June 30, 2020.  For federal income tax purposes, any amount that would be included in such borrower’s gross income due to such loan forgiveness is excluded from gross income. 

If a business reduced its staff or salaries between February 15, 2020, and thirty (30) days after March 27 (the enactment of the Act), the amount of loan forgiveness for which the business is eligible will not be reduced if the organization, not later than June 30, 2020, eliminates the reduction, as compared to February 15, 2020, in the number of full-time equivalent employees and/or salary of employees.  Finally, forgiveness is not automatic and must be applied for through the lender.




Title II of the CARES Act provides eligible employers an employee retention credit which is a refundable payroll tax credit for 50% of qualified wages (qualified wages are limited to $10,000 per employee per quarter). Qualified wages also include health plan expenses.  To be eligible for these tax credits the employer must have experienced a significant decline in gross receipts.

The CARES Act allows employers and self-employed individuals to defer the employer share of Social Security tax (6.2%). The deferred tax is payable in equal parts over the following two years.




Title IV of the CARES Act provides for loans to certain eligible businesses, including nonprofit organizations, with between 500 and 1,000 employees.  The loans have several requirements including a certification of need for the on-going operation of the business; that the funds will be used to maintain at least 90 percent of the business’s workforce at full compensation and benefits through September 24, 2020; that the business intends to restore not less than 90 percent or the workforce that existed as of February 1, 2020 and to restore all compensation and benefits to the workers no later than 4 months after the termination of the current public health emergency; will not abrogate any existing collective bargaining agreement and will remain neutral in any union organizing effort for the term of the loan.




The CARES Act expands the situations in which an individual would be eligible to receive unemployment compensation to those who are able to work, but are unemployed or unavailable to work because the individual has: COVID-19; symptoms of COVID-19 and is seeking a medical diagnosis; has a family member who has tested positive for COVID-19; is providing care for a child whose school or childcare facility has closed or because the individual’s childcare has been interrupted by COVID-19; is unable to reach their place of employment due to a quarantine; has become the breadwinner by virtue of the former head of household dying from COVID-19; has to quit their job due to COVID-19; has their place of employment closed due to COVID-19; is self-employed, looking for part-time work, does not have sufficient work history or otherwise would not normally be eligible for unemployment benefits; or for any additional criteria established by the Secretary of Labor.  In addition, to any unemployment received by individuals through State programs, an individual would be entitled to an additional $600.00 per week through Federal Pandemic Unemployment Compensation. 

Individuals may receive unemployment benefits for up to 39 weeks due to partial or full unemployment caused by COVID-19 from January 27, 2020 to December 31, 2020. Individuals may be eligible to receive unemployment benefits retroactively prior to the passage of the CARES Act.


Power & Cronin greatly appreciates the opportunity to provide you with the very best legal representation.  Please let us know if you need any further guidance with COVID-19 or any other matter to assist with your business.  Our staff of 15 attorneys are available at your request.


Very truly yours,


Daniel J. Cronin